Following on from the announcement of a £11.6m accounting error, the co-founder of M&C Saatchi has resigned, followed by three independent directors.
Despite founding the company in 1995 with his brother Charles, Lord Maurice Saatchi tendered his resignation on 10 December, alongside non-executive directors Lord Dobbs, Lorna Tilbian, and former KPMG employee Sir Michael Peat.
The agency is now left with just three directors as the agency’s shares collapse from nearly £4 to below £1, thanks in part to these boardroom departures.
Jeremy Sinclair, the agency’s chairman, said: “We have accepted the decision of these directors to resign. We are determined to restore the operational performance and profitability of the business.
“We have started a process to reconstruct our board with new independent directors. This new board will have a mandate to conduct a full review of all aspects of our governance.”
Sinclair, alongside chief executive David Kershaw and executive director Bill Muirhead, will remain at the agency.
A growing concern
These boardroom developments come after KPMG resigned as the agency’s auditor in early 2019, citing concerns about the company’s 2018 annual finance report.
Following this, PwC was brought in as an independent reviewer and found that in 2018, the company had booked 12-month contract revenues into the first half of the year. The Big Four firm also said that similar practices have potentially been taking place since 2014, compounding the situation.
In August 2019, the company first announced its initial £6.4m accounting error, and warned shareholders that the number could grow.
Then, in September, the agency’s profits also fell a whopping 67% to £2.5m.
Initially, Kershaw noted that these discoveries made “for very difficult reading – both for us as a management team and for all of our stakeholders.”
However, M&C Saatchi is no stranger to controversy. Originally founded after a shareholder revolt at Saatchi & Saatchi, it has faced a number of financial blunders throughout its 24-year lifespan, and come out on the other side.